Articles Posted in Entitlements

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The California Supreme Court’s latest California Environmental Quality Act (CEQA) decision contains important rulings affecting three areas of land use and environmental law practice.  The decision, Center for Biological Diversity v. California Department of Fish and Wildlife (November 30, 2015, Case No. 217763), was a 5-1-1 decision, and it arose out of one of many environmental impact reports (EIRs) that have been prepared for the large Newhall Ranch development that is proposed in northern Los Angeles County.  This particular EIR followed earlier EIRs certified by Los Angeles County in 1999 and 2003 in connection with the County’s primary project approvals.  The new EIR was a joint EIR/EIS prepared by the California Department of Fish and Wildlife and the U.S. Army Corps of Engineers to evaluate the impacts of several additional project approvals, including a resource management plan, a conservation plan for the endangered spineflower plant, a streambed alteration agreement, and two permits for the incidental take of protected species.

Several of the rulings in the case are likely to make the CEQA process, and the analysis of greenhouse gas emissions in CEQA documents, more complicated.  The primary rulings in the case are discussed below.

EIR Analysis of greenhouse gas emissions upheld in part, rejected in part.  The Court upheld some aspects of the EIR’s lengthy analysis of greenhouse gas emissions, but found that the analysis was not thorough enough.  There are three components to this ruling. Continue reading

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It’s frequently important to know when a land use project’s approvals are safe from judicial review. Sales often won’t close until the buyer is certain that the project’s approvals won’t be lost and lenders generally won’t lend until they can be certain that the approvals are good. Unfortunately, litigation is an all too often component of the real estate development process in California. Opponents have been presented by the Legislature and the courts with a whole panoply of weapons to attack the approval of a project, the three main ones being the California Environmental Quality Act (“CEQA”), the Planning and Zoning Act and the Subdivision Map Act. However, all of the acts contain statutes of limitations which specify how long an opponent has to start litigation but the time limits and who has to be served differ.

The first thing to know is what level of government is granting the approval and whether it is appealable to a higher level. As an example, many cities and counties will allow a planning commission to approve a tentative subdivision map subject to appeal to the city council or board of supervisors. The appeal must be filed within ten days of the planning commission’s approval of the tentative map. A failure to appeal means that an opponent has failed to exhaust its administrative remedies and is therefore barred from having a court review the approval regardless of the claimed violation of law. The law is similar for conditional use permits and variances which are also generally approved by planning commissions, subject to appeal to the city council or board of supervisors.

Other approvals, such as general plan amendments, rezonings and development agreements, can only be approved by a city council or a board of supervisors. There are no administrative remedies to exhaust because no further appeal is available. The only way to attack these approvals is to file a lawsuit within the time allowed by the appropriate act. For this reason, a transactional document should never condition an action on the time in which to bring an “appeal” has passed without one having been filed when it is the city council or board of supervisors which is the approving entity. Continue reading

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As California developers and public agencies well know, the entitlement process in our state is driven by CEQA, the California Environmental Quality Act.  CEQA, in turn, functions pursuant to the CEQA statute and the “CEQA Guidelines.” If you’ve ever wondered who writes those CEQA Guidelines, the answer is “the Governor’s Office of Planning and Research,” or “OPR.”  The CEQA Guidelines reflect OPR’s interpretation of CEQA’s statutory requirements, its reading of case law construing CEQA, and its take on “practical planning considerations.”  As a result, this little known operation in the Governor’s office plays a pivotal role in California’s entitlement process.  CEQA Guidelines are formally adopted by the Natural Resources Agency following review by the Office of Administrative Law, but OPR basically writes the Guidelines.

This year, OPR is engaged in two separate endeavors to amend the CEQA Guidelines.  One ongoing effort is the product of SB 743, legislation adopted in 2013 which likely will revolutionize the way traffic impacts in California are evaluated and mitigated by focusing on vehicles miles travelled (VMT) rather than level of service (LOS).  We have discussed with you in prior “Lay of the Land” posts the potential implications of the new SB 743 Guidelines being prepared by OPR.

The other effort began two years ago, when OPR announced its intent to consider a broad range of revisions to the CEQA Guidelines.  OPR solicited public comments and received a very large number of comments making a wide variety of suggestions.  Since then, OPR has been considering the many comments and suggestions received, and OPR has now, on August 13, released a preliminary draft of proposed Guidelines amendments based on the public suggestions and OPR’s own ideas.  The public is invited to comment, through October 12, and this is an important opportunity for stakeholders in the CEQA process to evaluate the proposals and weigh in with comments.  In contrast to recent Guideline amendments on particular topics such as greenhouse gas emissions, this is the first overall update of the Guidelines in many years. Continue reading

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In the legal world, the word “dictum” refers to words in a court opinion which are best considered non-binding “remarks” or “comments.”  Relying on dictum in a 2006 Supreme Court decision, the California State University Board of Trustees (the “University”) concluded that paying its fair share of offsite mitigation related to the traffic impacts of its proposed expansion of the San Diego State University campus was “infeasible.” Under CEQA, a proper finding of infeasibility would have allowed the University to adopt a Statement of Overriding Considerations and avoid the University’s fair share of offsite traffic mitigation.  The only factual basis for the University’s finding of infeasibility was that the Legislature had not earmarked specific funds to cover the University’s traffic mitigation costs and was not likely to do so.

This week, the California Supreme Court issued a decision in City of San Diego v. Board of Trustees of the California State University stating in a moment of candor that the dictum which had been relied upon by the University was “simply an overstatement.” The Court concluded that the University failed to address the availability of funding from other sources and could not support its claim that using other funds available to the University for offsite mitigation would be an illegal gift of public funds. The Court agreed with the position urged by the City of San Diego, stating that under the University’s reasoning “off-site mitigation would likely be found infeasible for many, if not all, state projects that receive non-state funding, and more such projects would proceed without mitigation pursuant to statements of overriding considerations.”  Because the Court concluded that the absence of earmarked funds did not make the University’s participation in the mitigation infeasible, the Statement of Overriding Considerations was invalid.

Although the specific holdings of this case apply to State agencies, the decision is an important reminder of the care that must be taken with any project, whether private or public, in making proper findings to support a Statement of Overriding Considerations.  To support a Statement of Overriding Considerations, CEQA requires both (i) that a finding be made that there are specific considerations which make identified mitigation measures or alternatives infeasible and (ii) that there are “overriding economic, legal, social, technological, or other benefits of the project” which outweigh the project’s significant unmitigated impacts. For the first finding, CEQA defines “feasible” to mean “capable of being accomplished in a successful manner within a reasonable period of time, taking into account economic, environmental, legal, social, and technological factors.”  Therefore, in the City of San Diego case, once the Court determined that reliance on the Legislature’s failure to earmark mitigation funds did not alone make the University’s fair share traffic mitigation obligation “infeasible,” the Statement of Overriding Considerations was doomed.

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Forget nexus. Don’t worry about rough proportionality. It’s not an exaction and it’s not a taking.  In a ruling that will adversely impact landowner and market-rate developers, while providing new opportunities for affordable housing developers, the California Supreme Court has given the go-ahead to the City of San Jose’s affordable housing ordinance which requires developers to include affordable housing units within their market rate projects, unless they elect other equally impacting alternatives.

As a result of the Court’s ruling today in California Building Industry Association v. City of San Jose, developers should anticipate that both the Legislature and local municipalities will consider new opportunities to increase the numbers and distribution of affordable units, both rental and for-sale, within local communities. One of the important practical effects of this ruling is that municipalities will not need to demonstrate that market rate housing creates the need for affordable housing in order to adopt and implement an affordable housing ordinance.

The San Jose ordinance applies to all for-sale projects of twenty or more new, additional, or modified residential units. The ordinance requires that fifteen percent of a project’s on-site units be available to “moderate income” households, those earning no more than 120 percent of the area median income. The ordinance itself provides that it will not apply to rental units until a 2009 appellate court decision, Palmer/Sixth Street Properties, L.P. v. City of Los Angeles, is no longer the law.  When and if that occurs, the ordinance requires nine percent of the rental units to be available at rates affordable to moderate income households, with another six percent to be available at affordable rates to very low income households. It also contains alternative methods of compliance, such as building off-site affordable for-sale units, paying an in lieu fee, dedicating land, and rehabilitating offsite affordable units. The Court’s focus, however, was on the “inclusionary” component of the ordinance.

In adopting this ordinance, the San Jose City Council found that, among other things, new market-rate housing drives up the price of land and diminishes the amount of land available for affordable housing. It also found that new market rate homes create demands on services resulting in “a demand for new employees” whose earnings will allow them only to pay for affordable housing. Those circumstances, in turn, were found to “harm the city’s ability to attain employment and housing goals articulated in the city’s general plan and place strains on the city’s ability to accept and service new market-rate housing development.”

The stated purposes of the ordinance included meeting the city’s share of regional housing needs, implementing the goals of the city’s general plan and, specifically, its housing element, and providing for the integration of affordable and market rate housing products in the same neighborhoods.

In its ruling, the Court made a critical distinction between affordable housing impact fees intended to mitigate the specific impacts of a project and an inclusionary affordable housing requirement designed “to serve a constitutionally permissible public purpose other than mitigating the impact of the proposed development project.”  In doing so, the Court carefully distinguished both state and federal judicial decisions focusing on “nexus” and “rough proportionality,” concluding that this ordinance is more akin to other “permissible land use regulations,” such as use, density, size, setback, and aesthetic requirements and restrictions and price controls.  As a result, the Court concluded that the San Jose ordinance is neither an exaction nor a taking, but rather a proper exercise of the city’s general police power to regulate land development to promote the public welfare.  In the context of constitutional law, once the Court reached that conclusion, it could only review the ordinance “deferentially” and the burden shifted to the California Building Industry Association to establish that the ordinance bears “no reasonable relationship” to the public welfare, a challenging threshold which the Court determined had not been met.

The Court concluded that increasing the supply and distribution of affordable housing within the city is within the city’s “constitutionally permissible public purposes” and is “intended to shape and enhance the character and quality of life of the community as a whole.”  As a result, the ordinance was found to address “the critical need for more affordable housing in this state” and allowed to stand.

In rendering this decision, the Court has provided public agencies and developers alike with additional guidance on how far a California agency may go in regulating land development before its actions will be considered an exaction subject to the constitutional limitations of “nexus” and “rough proportionality.” The implications of this decision are likely to be significant not only with respect to affordable housing, but also with respect to other land use restrictions and requirements aimed at “promoting the public welfare.”

Unless a hearing before the United States Supreme Court is sought and granted, this is the final say on the validity of San Jose’s affordable housing ordinance.

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Wouldn’t it be nice if you only had to prepare a mitigated negative declaration (MND), rather than an EIR, before getting your project approved? The Planning Director says “That’s all we need,” but your lawyer says “Not so fast.” Your project manager calculates that an MND will save you six months and at least a hundred thousand dollars. Your lawyer repeats, “Not so fast.” You ask yourself, “Now what was it that Shakespeare said about lawyers?”

CEQA documentation, like Gaul, is generally divided into three parts: exemptions, negative declarations, and environmental impact reports (EIRs). Rarely does a project of any substantial size or complexity qualify for an exemption or a “pure” negative declaration. If the agency determines that there are potential project impacts, the choice narrows to an MND or an EIR. If specific mitigation measures can adequately address those impacts and the applicant agrees to accept those measures before circulation, then an MND may be used. However, if potential impacts remain or if there are impacts which cannot be mitigated, an EIR must be prepared. But the decision frequently is not clear and, ultimately, is made by the agency, generally with input from the developer.

CEQA Scale

CEQA Litigation Doesn’t Rely On The Scale

For the developer, what are the typical considerations? An EIR may cost hundreds of thousands of dollars and take a year or more to prepare, followed by circulation for public review and comment. Then, responses to comments must be prepared. Sometimes, the EIR must be recirculated. That adds up to a lot of dollars and delay. Preparing an MND, however, also requires significant time and money, although, in the short run, less than an EIR. Circulation for review and comment, though for less time than for an EIR, also is required. While CEQA does not mandate written responses to comments on an MND, many agencies exercise their prerogative to do so. So, why might a developer ask the agency to prepare an EIR when the agency has said that an MND is enough? Continue reading

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Digital rendering of the proposed La Bahia Hotel in Santa Cruz

Digital rendering of the proposed La Bahia Hotel in Santa Cruz

The final chapter of the entitlement history of the La Bahia Hotel in the City of Santa Cruz suggests a telling lesson for oceanfront coastal zone projects: keep it simple. The proposed hotel is on the site of the La Bahia Apartments, which were developed in 1926 as luxury apartments and are designated as a local historic landmark. This entitlement story began with the City’s 1998 adoption of the Beach and South of Laurel Comprehensive Area Plan, which envisioned a revitalized beachfront area. The Area Plan contemplated revitalizing older lodging facilities along the shoreline and attracting a quality hotel to the beachfront at the site of the La Bahia Apartments. Parts of this Area Plan were adopted by the Coastal Commission and included in City’s Local Coastal Program (LCP). As with many coastal projects, transforming the vision into reality would have its challenges. In 2003, a hotel proposal was approved by the City, but with conditions of approval that resulted in the applicant deeming the project financially infeasible. In 2009, the City approved a coastal development permit (CDP) for another hotel project, but needed to first amend its LCP to do so. That amendment required Coastal Commission approval. The Commission rejected the amendment in 2011.

The Santa Cruz Seaside Company, the owner/operator of the Santa Cruz Beach Boardwalk, then stepped in and submitted a proposal for a 165-room beachfront hotel and conference/banquet facility. Notably, this project would not require amendment of the City’s Local Coastal Program, thus “keeping it simple.” As a result, it did not need Coastal Commission approval unless the City’s approval was appealed to the Commission and presented a substantial issue. Continue reading

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Here’s the continuing message from the courts to public agencies demanding money or land from developers: There must be a strong connection between your exaction and the impacts of a project or else the exaction violates the Constitution. Established more than two decades ago by the United States Supreme Court, the principles of “nexus” and “rough proportionality” can no longer be considered “new.” Yet, public agencies continue to explore the limits of the courts’ tolerance for “too much” in the way of exactions. In 2014, two California decisions, one state and one federal, told public agencies that they had gone too far.

The federal case (Levin v. City and County of San Francisco) addressed San Francisco’s rent control ordinance. Under the ordinance, if a landlord wants to remove a rent-controlled unit from the rental market, the landlord must pay the displaced tenant the lump sum equivalent of twenty-four months of the difference between the tenant’s controlled rent and the prevailing market rate rent for a similar unit. Additionally, that amount is increased based upon how long the tenant had resided in the unit, with many tenants owed well over $100,000 under the ordinance.

The federal district court found that a landlord’s decision to remove a unit from the rental market did not create the disparity between the controlled rental rate and the market rental rate. First, market rates are the product of economic factors that have nothing to do with the landlord. Second, the disparity between controlled rates and market rates exists only because the City chose to impose rent control. As a result, there was no valid connection between the rental disparity and the landlord’s removal of the unit from the rental market. Therefore, the court found that the ordinance was a taking without just compensation under the Fifth Amendment.

Similarly, in Bowman v. California Coastal Commission, a California court of appeal addressed a San Luis Obispo County requirement for dedication of a shoreline easement as a condition to the County’s approving the renovation of a house and barn on the same 400-acre site, but a mile from that shoreline. Continue reading

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Welcome to “Lay of the Land.” The contributors to this blog come principally from the ranks of the Land Use and Natural Resources Practice Group of Cox, Castle & Nicholson LLP. We hope to share with you the unique perspectives of a deep, experienced, and skilled group of land use practitioners. We are honored that Cox Castle & Nicholson was recently named the nation’s 2015 “Law Firm of the Year” for Land Use & Zoning by U.S. News & World Report and Best Lawyers.

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You are entitling a large project to be built in phases which reflect market conditions, lending constraints, absorption rates, and your appetite for risk. The final phases of your project may not be built for ten or more years, when planning and marketing considerations may have changed. Your EIR cannot possibly evaluate every last detail of the overall project, but you want to get started with the initial phases NOW. So, you hear your CEQA consultants, your lawyers, and the agency’s staff anguishing over whether your EIR will be a “program” EIR or a “project” EIR. You’re hearing that what you call the EIR may be more important than what it says and that a wrong decision on the label may drop you into the black hole of CEQA litigation. Really? Can this be true? Continue reading

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